As my career has progressed, at times of reflection, I have endeavored to assess what kind of relationship with my clients achieves the best results. And for that matter what kind of client achieves the best results using my service. How important is the stockbroker relationship in achieving outperformance?
1) Have an open conversation with your broker
If you are new to share investing your stockbroker can be an incredibly helpful guide and knowledge source to help you navigate many of the potential investment traps and mistakes that can be made when starting out.
2) Work out what relationship you want and make sure it’s not just an expensive echo
My mentor once told me, “people get what they want out of the market.” His point was that some people don’t play the stock market with the clear intent of making money. There are clients that I have had that unfortunately have never actually wanted my advice but have sought an expensive soundboard to bounce ideas off without any intention of seeking an alternative opinion. Many of whom came into the market wanting to be highly profitable traders without ever reading a book or taking the time to flesh out a trading strategy. The unfortunate reality of the market is that it doesn’t matter how successful you are in your chosen career, the market is its own beast, capable of humbling anyone who fails to give it the respect it deserves.
3) Consider if a Managed Discretionary Account is right for you.
My most successful group of clients have been those that have entrusted me with their funds through a managed discretionary account. This allows me to make trades on a client’s behalf when time critical events don’t allow me the opportunity to call my wider client list. This type of premium account will always receive a broker’s full attention, on a daily basis they will assess your portfolio’s holdings and scan the market for opportunities for you.
4) Collaboration is key
Making money is often a team effort and thus the decision making process and the investigative process often works better when both the broker and the client have their eye on the prize. Many clients will do their own research and will on occasion have me do research for them. Clients that collaborate are often engaged, interested and want to learn more leading to better decision making.
5) Take on board stock recommendations
Some of my most successful clients have done very well by only taking on my buy recommendations. Although not all recommendations go to plan many have resulted in 100% + gains and more than made up for the losers. The process that has worked best is that following purchase the client remains engaged in the progress of the company and we talk about the company and discuss the eventual exit strategy.
6) Get on the same page
When making an investment I always like to have a plan. Things to discuss with your broker are, Is this a short or long term investment, how risky is the opportunity, what are the potential catalysts that could send the stock higher, what happens if something goes wrong with the investment and thus what is the exit strategy in the event of success or failure. Having these discussions helps align expectations and creates a process by which all parties can feel assured that they know what is going to occur whilst holding the investment.
7) Don’t pay for a full brokerage service and not use the resource
The most in danger of losing wealth and the hardest to engage with are the clients that don’t want to use their stockbroker as a resource. These clients have made their own calls and have usually done minimal research about their investment. They believe that you can set and forget and they aren’t interested in changing their minds.
8) Make sure you are on the list
If you want to be more involved and receive the latest news it is important that you are on the correct mailing lists. If you want to be part of more offerings make sure you get in touch with your broker and ask if you are on the best buys list, the short term trading list, the ipo list, the SI list, and the seminar list.
9) Get on the phone
If it has been some time since you last found out about how the stocks in your portfolio were doing it is time to get in touch and start the conversation. Unfortunately the hard part in stockbroking is that often clients don’t make up a significant revenue stream and have shown little interest in learning more and can often sit on a broker’s client list going unnoticed for months if not years. If you are reading this and think that you may be this type of client it is time to re-engage and reassess where you are at. It’s never too late to establish a better relationship with your advisor and let him or her know that you want them to be involved.
10) Educate yourself with our helpful resources
We have initiated a number of recent improvements in our communication strategy at Baker Young that aims to re engage with our clients and provide them with relevent insights to help them with their investment decisions. We have established a new facebook and linkedin page that you can follow, a new website with an insights section with our latest recommendations and market news. We have also established a new email platform that will allow faster and more effective communication with you when trade ideas and market news is sent out.